EXECUTIVE SUMMARY

Chapter 1.

The Chapter draws on Armenia's socioeconomic situation in the transition period, its unfavorable initial conditions, peculiarities and goals, presenting the overall picture of the implemented social, economic and political reforms of that period. The starting point of the transition period in Armenia is considered 1990-91.

The authors of the Chapter delineate the political and economic outcomes of the transition period. In the political sphere, the adoption of the Constitution is considered as a serious step forward in laying the legal foundation for a transition from totalitarian system to a democratic state. Mentioning a number of political goals, grounded in the changes of the transition period, the authors assert that the basis of a democratic system has been created in Armenia. Nonetheless, a number of steps should be taken to make it irreversible.

Based on the socioeconomic characteristics, and the steps undertaken by Armenia towards establishing market relations, the current situation in Armenia is evaluated as relatively stable. However, it is necessary to draw up long-term programs of economic development in light of sustainable human development to preserve and reinforce what has already been attained.

The analysis of Armenia's economic situation, with its achievements and failures, indicates that, despite having attained macroeconomic stability, the situation remains difficult. Among achievements one can point to the evident improvement of the living standards as compared with the most difficult years in early 1990s, the development of physical infrastructures, the establishment of banking, taxation and customs systems, etc. At the same time, negative impact seems to have outweighed achievements. Among the failures are mentioned ruined industry, migration, the mis-implemented privatization, dependency on external financing, polarization of society, etc.

In the end, the authors offer a number of recommendations which can boost country's development in the future.

Chapter 2.

The Chapter analyzes social and economic reforms that have been carried out, emphasizing the "most neglected" social sphere. The noticeable decline in the State's regulatory role is present here too, which has resulted in a narrowed access to social services for the population. A number of long-term programs are either in the phase of development or implementation in education and health.

The demographic situation has deteriorated, manifested in significant decline in the reproductive potential and the actual number of the population. The situation in the labor market remains strained. The percentage of employed continues to decrease, hidden employment grows, approaching considerable sizes. The per capita incomes of the population have decreased four-fold.

The per capita minimal subsistence basket in Armenia equals 66 USD while the per capita income and average salary make up about 45% and 30% of this amount. Expert evaluations point out stable trends of poverty and impoverishment in Armenia.

In an attempt to follow the process of impoverishment and evolution of poverty in Armenia, the authors divide it into four conditional phases. Also, vulnerable families are divided into five conditional groups, based on their capability of overcoming poverty. Such an approach could be very useful for the government in designing programs aimed at alleviating poverty.

In reference to pensioners and the system of family allowances, the authors point out a host of problems, deficiencies and limitations in those spheres. In particular, the system of family allowances, which was put into effect in 1999, despite its evident advantages over all the existing systems, requires essential improvement.

The recommendations offered by authors involve the social sphere, including poverty alleviation, health, education, social protection and pension insurance, demographics and employment policy.

Chapter 3.

Social cohesion and cooperation are considered as critical factors for the self-organization and establishment of society.

The authors scrutinize factors of consent and discord in the transition period. At the initial stage, Armenian society succeeded in achieving a high level of cohesion thanks to ideas of the re-unification of Armenia and Nagorno Karabagh shared by the absolute majority of the people. However, the impact of the factors hindering this cohesion (the absence of a uniform economic complex, the weakness of internal cooperation and economic ties, prevalence of foreign links over the domestic ones, etc) brought about the weakening of internal social cooperation.

The authors believe that the disintegration of the economy occurred parallel to the monopolization of power and the insufficient division of power among its branches. Despite noticeable positive trends observed recently, which can be seen in the multiplication of the centers of power, no essential increase in the level of cohesion has been attained. This is ascribed to the absence of accord concerning the goals and means of political activities. Furthermore, the people trust neither the reforms nor the authorities.

Mechanisms of accord among different layers of population do not exist in society, which brings about a conflict between the employer and employee. The rights of the hired work force are not protected. Neither is the status of trade unions clear. At the same time, new trade unions are emerging in the form of NGOs and strike committees.

The authors present information on the integration of vulnerable layers of the population, including the disabled, the elderly, and the refugees, as well relevant activities. However, the issues so far remain unresolved, as the level of integration of the disabled is still unsatisfactory, hampered by economic, cultural and social pre-requisites. The elderly have found themselves in the status of passive, insecure consumers. The integration of refugees is mainly hampered by their inability to speak the Armenian language.

The authors divide the entire post-reform time-span into three phases, from the point of view of social cooperation: 1.when the population was united around the idea of Karabagh; 2.when the interests of the ruling group, the private sector and society failed to coincide; 3. a "state-oriented" phase, when certain activation has been observed in the sphere of State activities and business unions. While analyzing the means of a transition from a totalitarian system to a new model of "social partnership" the authors emphasize, as a mutually acceptable alternative, "paternalism d'etat" when the State transfers its functions to the private sector and civil society organizations when they are ready and willing to take them over, with the help of the State.

Chapter 4.

The role of the State in the establishment and preservation of legitimacy is perceived in Armenia to be of crucial urgency. According to the authors, mass violations committed in the past have been attributed to the establishment of democratic rule and its outcome, which in turn orients the people toward the communist past.

The Chapter draws on the state limiting field, among which are the Constitution, the civil rights and the free press. The authors attach special importance to the necessity of re-establishing the balance between the executive, legislative and judicial powers. In the present they are not independent from each other. The press, despite its freedoms, develops very slowly due mainly to financial problems.

While presenting the spheres of state activities, the authors underline the necessity of increasing the role of the state, which has been reduced to a minimum: in the social sphere, state activities are mainly evaluated as ineffective. Certain progress is observed in the sphere of human rights. Foreign policy, membership in international and regional organizations and programs have also been examined this Chapter. The authors refer to globalization as a rapidly expanding phenomenon, which should not by-pass Armenia.

After Independence, a number of institutional changes in regard to public administration occurred in Armenia, which resulted in the re-conceptualization of the role of the state and changed state functions. State capacities and the efficiency of administration are highly dependent on the organization of civil service and human resource management.

While describing the unfavorable ecological situation in Armenia, which is the result of the former development practices as well as the deep economic crisis which has emerged over the recent years, the authors contend that the environmental component of sustainable human development could be improved only if the socioeconomic crisis is overcome.

Conclusions and recommendations offered by authors end this chapter.

Chapter 5.

Society's genuine development is predicated on the implementation of balanced, economic, social and environmental protection policies, which put people first and target the higher quality of life as the ultimate goal. World experience shows that the among the natural, physical and human capital comprising any country's wealth, the investment in the latter prove the most effective, since they ensure healthy and intelligent workforce. In Armenia, investments in human capital are so far insufficient, however they show a tendency toward growth. Given the outflow and dissipation of human capital existing in Armenia, this acquires paramount importance.

Among the means for securing rapid economic growth, the authors see development based on economic efficiency, which implies alleviation of the taxation burden for Armenia, reinforcement of competitive nature of economic activities, and creation of conditions for the eradication of ineffective economic activity.

Based on the analysis of social and economic reforms that have been carried out, the authors suggest a "comprehensive investment and economic development strategy" which should include activities securing market relations, institutions and structures, the legal field for business and active investment policy promotion, the adoption of a concept on nation-state security, the resolution of the social issues of the population and increase in living standards.

While describing Armenia's ecological-economic sphere, the authors assert that the country's development should unquestionably take into consideration ecological priorities. Otherwise, i.e. should any be neglected, the country is left out of a sustainable development route.

The authors outline traditional and holistic approaches of SHD orientation, concentrating on the latter, since they consider it to be more effective and all-inclusive. This approach envisages the elaboration of the most optimal SHD model and the means for its realization based on Armenia's current situation and the existing potential in all spheres of vital importance. It is in particular the development of a non-material sphere of economy and the use of the region's peculiarities.

The SHD concept, being relatively new in Armenia, is not unilaterally accepted. The alternative approach to Armenia's development unfortunately still has its supporters both in academia and in the power structures. It concentrates on developing the economy at any means.

The Chapter ends with main conclusions and recommendations on the vision and future of Armenia in light of SHD, based on the entire analysis of the Report.